Proactive investors

Sylvania Resources

Sylvania Resources is positioned to create long term benefits and value

For platinum focussed Sylvania Resources the recent market downturn has sparked a wave of corporate activity. This has specifically involved scrip takeover offers for two emerging junior platinum companies, SA Metals and Great Australian Resources, as well as the more recent announcement of a strategic merger with Finland’s Ruukki group. This leaves the company well placed to become a fully integrated PGM and ferro-chrome producer.

Recently released June quarter production results and those for the full-year were pleasing, as they exceeded expectations and were achieved against a backdrop of operational challenges. For starters, the company effectively had only two operational plants during the past financial year to 30 June 2009. Furthermore, during the June quarter, the Steelport plant was reduced to testing alternative feed sources.

Nevertheless, in spite of poor platinum prices over the majority of the past year, the company was able to contain costs and maintain profitability. During the June quarter, Sylvania achieved an unaudited net profit of R32.8 million (£2.5 million) before tax and minority interest. Net revenue for the quarter fell from R44.6 million in the previous quarter to R22.7 million in the June quarter, primarily due to lower production.

Now let’s turn our attention to the company’s corporate happenings. On 11 May 2009, Sylvania announced its intention to make two off market takeover offers for all the ordinary shares in SA Metals Limited (ASX: SXM) and Great Australian Resources Limited (ASX: GAU) respectively.

The combination of the PGM assets of Sylvania, SA Metals and GAU provides an opportunity to create long-term benefits and value for the shareholders of all three companies through improved scale and penetration of the market for the supply of PGM resources.

Elsewhere, on 30 June 2009, Sylvania and Finland’s Ruukki entered into a potential merger, with the aim of creating an integrated mine-to-metals PGM and ferro-chrome company. Under the Proposed Ruukki merger, each Sylvania shareholder will receive 1 Ruukki share for every 1.81 Sylvania shares held on the Proposed Ruukki Merger record date.

Ruukki is a company incorporated in Finland which specialises in industrial refining of specialised natural resources within two areas: minerals and wood. The minerals business has mining and mineral processing operations in South Africa, Turkey and Germany. The wood processing business has a strong presence in the northern part of Finland. Ruukki's shares are listed on NASDAQ OMX Helsinki (trading symbol RUG1V).

Ruukki will divide its wood processing and minerals businesses, ultimately resulting in two separately listed companies during 2010. The separation of the wood processing and minerals businesses will commence after completion of the Proposed Ruukki Merger.

All in all, the moves enhance Sylvania’s position in the PGM arena and with the Chinese economy flying and the global automotive industry showing signs of life these moves could not be better timed.